a reverse point wave is formed when a formation is created similar to a broadening top or bottom. i will describe a bottom. a rpw at the top is simply reversed.

point 5 is the low day
point 3 is lower than point 1 but higher than point 5
point 4 is higher than point 2.

a seven point rpw is another high from point 5 (point 6) then another low below point 5 (point 7)

look at the yen chart. point 7 made tonight, point 6 is high of aug 21, point 5 is low of aug 15, point 4 is the high of aug 13, point 3 is low of aug 11, point 2 is high of aug 7, point one is the low of aug 6.

several strategies can be used for entry, exit and stops. the highest percentage is to enter on a close above the high of the low day. sometimes the risk is way too high because the stop should be a significant distance below the low of 5 or 7. look at december silver. the stop would be $2.00 away.

i cheated on the entry point tonight on a british pound. the rsi w/divergence indicates a bottom is near. the 7 point on the yen also indicates the same. the rsi on the usd index is almost off the chart. grains are in rally mode while the usd index is up. one (grains or usdx) will turn soon. we also have a h&s in the making in the gold and a rpw in the silver. they also slammed some of the markets just after the opening and didn’t take out the lows within the first two hours. i was able to enter with a stop at about $250. loss and a potential $5000. gain. i like those odds.

the hard part of the rpw is to get in with acceptable risk. sometimes you get a reversal on the point 5 day and the market trades back to 50% of the bottom days range. it’s very common to get a h&s bottom with the left shoulder being point 3 and the head is point 5.

hope this helps.

rno